"Government handouts." That's what Anna Aquino, 31, a homeowner in Kissimmee, Fla., calls her state's latest plan to help residents pay off their mortgages.

Aquino, whose own home has lost $30,000 in value since she bought it during the boom, says Washington's $418 million mortgage assistance for distressed homeowners in Florida is spoiling Americans into constantly expecting help.

"It's not up to our government to bail out every hard-hit person," she says of Florida's proposal, which is currently under review by the U.S. Treasury and is expected to take effect later this summer. "Whatever happened to the American spirit of trying to pick ourselves up from our boot-straps?"

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Blameless Hardship?

The Florida Housing Finance Corporation, which is managing the program, says it's not about bailing out foolish investors, but helping average Floridians who were caught off-guard by the massive economic crisis. Only those who can prove true hardship -- such as blameless loss of a job or government benefits -- can qualify, says FHFC spokeswoman Cecka Rose Green.

"This way we're actually hoping to help those who need it, not just those who made some bad investment decisions," she says.

Mortgage Assistance

Florida is one of 10 states that will be receiving money as part of a $2.1 billion federal program to help distressed homeowners pay their mortgages.

The first five states to qualify -- Arizona, California, Florida, Michigan and Nevada -- recently submitted their proposals to Treasury for approval and are expected to implement them this summer. Another five states -- Rhode Island, South Carolina, Oregon, North Carolina and Ohio -- are still waiting for federal guidelines.

Monthly Payments

States that have already submitted their plans have taken a variety of approaches. Under Florida's proposal, for example, the state would make nine months of mortgage payments on behalf of homeowners as long as lenders agree to forgive another nine months of payments.

In Arizona, the state would match a bank's forgiveness of principal with payments of up to $50,000.

Critics of the program have been pointing out what they say are its flaws since it was announced in February. The biggest complaint has been that it takes taxes paid by responsible Americans to bail out those who bought more home than they could afford.

Alex Pollock, former CEO of Federal Home Loan Bank of Chicago and now a research fellow at the conservative American Enterprise Institute, says using TARP money to bail out homeowners isn't even legal.

TARP Funds Not Meant to Bail Out Homeowners, Critic Says

"The TARP statute authorized the Treasury only to make investments to acquire assets, not just to spend money on subsidies for people," he says, arguing that TARP was meant for investments that could yield some kind of return for taxpayers. These programs, however, don't consitute investments. "It's money that's not ever coming back."

The Treasury did not immediately provide a response to the criticism, but supporters of the program argue that it was specifically designed to help deserving homeowners.

Florida's $418 million program, estimated to help 12,000 Floridians, specifically claims that it is designed to help those who are struggling to make ends meet because of "hardships due to circumstances beyond their control."

Those who qualify include those who have lost their jobs or pensions without blame, or had to repair uninsured damage that made their home uninhabitable.

Arizona's $125 million program, meant to help about 4,000 residents, excludes homeowners who took out home equity loans or those who can't even afford their mortgage at today's depressed prices.

Not a Handout

"This is anything but a government handout for undeserving homeowners," says Reginald Givens, the Neighborhood Stabilization Program Coordinator at the Arizona Department of Housing. "We've been designing the program to ensure that eligible consumers have not been irresponsible in their borrowing."

The Treasury is reviewing proposals submitted by the first round of states and is expected to approve them by June 1. Once they have been approved, funds are likely to become available by early July.

Eligible states were chosen based on hardship. The first round of funds, $1.5 billion, was earmarked for states whose home prices had fallen more than 20 percent: Arizona, California, Florida, Michigan and Nevada.

The program was later expanded with $600 million allocated to states with large populations facing an unemployment rate above 12 percent: North Carolina, Ohio, Oregon, Rhode Island and South Carolina.